Finance Friday: India News Digest

Finance Friday is our Weekly News digest that brings you snippets of Buzzing stories in field of Finance & Stock Markets.

Finance Friday India News Digest

IPO Time Again, NHPC IPO likely to hit the market In August

Stock Market IPO

The Economic Survey report had in its detailed report signified that importance of disinvestment reforms in the Budget. To the surprise of many, the budget did not dole out too many reforms for the same, but did open up some avenues for the PSU’s to open their arms to the public.

Hydro power firm NHPC Ltd is likely to launch its much-awaited Rs 1,670-crore initial public offer by August to part finance its expansion plans. NHPC plans to issue 10 per cent of its new equity shares in the public offer, while the government alongside will divest its five per cent stake in the company.

NHPC has plans to raise 1670 crores through this IPO brining 167 crore shares at 10 Rs face value each. As per the sources, the board has 6 independent directors and once the 7^th is finalized, NHPC should hit the market

The government has also approved disinvestment of two other companies, albeit loss making. Tyre Corporation Of India(TCIL) and Central Inland Water Transport Corporation ltd(CIWTC)

Mahindra Holiday IPO did not evoke a very positive response on the opening day even after getting oversubscribed. So, I wonder if the timing of NHPC IPO might become a deterrent to their expansion plans.

With government disinvesting its loss making companies seems like a win-win situation for both government and the private companies.

Government gets some extra cash in the its coffers to supposedly spend money on improving the state/country (Pun Intended)
Private Players get to get their hands on decent companies at dirt cheap prices. Loss making Company Decent. How? That’s because most of these companies have been suffering losses owing to improper management and the good old bureaucracy.

But then, company valuations are never that easy. Moreover, How does a private player ensure the profitability of a venture. This brings me to a thought provoking question.

Is Disinvestment Good For India

Is the Indian Economy Reviving and Investor Confidence Returning?

IPO Times Are Here Again with Mahindra Holiday IPO coming out and many more like NHPC on the cards.
L&T Finance to sell $205 million of bonds in July.
Sterlite to raise a massive $1.5 billion

If these three pointers are anything to go by, it is certain that either the Investor Confidence returning or at least the organizations are betting on it and the economy getting better.

With L&T looking to raise money through sale of bonds, Sterlite is looking to do so via security issue in the US markets.

Sterlite capital infusion plan has been met with some speculations. According to the company sources, the money raised will be used for expansion plans. However, market pundits believe that the money is being raised to fund for the possible acquisition of the bankrupt Asarco.

It is to be noted that the market price of Asarco has gone up in recent times, and it might lead to revised bids.

But then if Chairman Anil Agarwal is to be believed,

"We are sitting on our balance sheet (on a sum of) about $6 billion, and we are fully funded on this (Asarco), so we are not going to use this money (ADS proceeds) for Asarco. We have separate money for Asarco, which we will invest in that company."

Only time will tell how this story unfolds, but there has been some confusion on this one. And confusion did cost the Sterlite Stock which took a beating in the Indian markets the day news came out.

Freaky Finance Jargon Buster

jargon-buster

Using Face Value to Pick the right stock

What is Face Value:

The nominal value or dollar value of a security stated by the issuer. For stocks, it is the original cost of the stock shown on the certificate.

For bonds, it is the amount paid to the holder at maturity (generally $1,000). Also known as "par value" or simply "par". (Source: Investopedia)

How to Use Face Value to rate Stocks:

Face Value unlike the trading value is something that should be considered while rating the stocks expensive or cheap.

Let’s take a very simple example to deal with this. Case in point, Three Indian IT giants Infosys, Wipro and TCS.

	INFOSYS	WIPRO	TCS
CURRENT PRICE	1,861.30	428.25	435.65

So, which one do you think is the most expensive stock out of the three? Without doubt it is Infosys, isn’t it followed by TCS and Wipro.

This is where the retail investor (you and me) gets fooled. The trading price can and should never be treated as a deciding factor alone. Why you ask?

This is because it is unlikely that there Face Values are same, and in this case, they sure aren’t.

	INFOSYS	WIPRO	TCS
CURRENT PRICE	1,861.30	428.25	435.65
FACE VALUE	5	2	1
EFFECTIVE PRICE	~372	~214	~435

Did the whole equation change now? This shows that TCS is indeed the costliest stock out of the lot with Infosys and Wipro following it.

This non-uniform face value of the Stocks makes it tricky and confusing for the retail investor to make those informed decisions.

It is however, worth noting that rating the stocks on Face Value alone is not the necessary and sufficient condition.

The Stock market dynamics are too far stretched out for that. There are numerous factors like P/E ratios, EPS etc which help in getting the fundamental analysis right. But let’s take them one at a time.

This Finance Friday news digest is written by Ankit Agarwal, an ERP Consultant by profession, a wannabe entrepreneur and stock market stalker by passion

Share & Bookmark

Author: Arun Prabhudesai

Arun Prabhudesai is founder / chief editor at trak.in. He jumped the Entrepreneurship bandwagon in early 2008 after a long 13 year stint in I.T Industry. You can follow him on twitter @trakin or get in touch with him at admin-at-trak-dot-in or 91.9822575676.

Finance Friday: India News Digest

Tagged as: Disinvestment in India, Finance, how to invest in stock market, India Primary Stock market, Indian Finance, Indian IPOs, Investing in IPO, IPO in India, Jargon buster, Mahindra Holiday IPO, NHPC IPO, Sterlite Capital, Stock Face value

Finance Friday: India News Digest